The first week of the year starts with a series of high-quality economic data, including German and European inflation data for December. Inflation in Germany is likely to drop in December, but this will only be short-lived.
Economists polled by Dow Jones Newswires expect the harmonized index of consumer prices (HICP) to fall 0.5 percent from the previous month, bringing the annual inflation rate down to 10.3 (11.3) percent.
The reason is that the state takes over the down payments for natural gas in the last month of the year. However, opinions differ as to how strong exactly this relief works. Commerzbank points out that initially only households that pay directly to the gas supplier will benefit from the relief, not those that make advance payments to their landlord. Inflation is likely to pick up again in January.
In the euro area, inflationary pressures had already eased somewhat in November and this development is likely to continue in December – albeit only temporarily. Here, too, the reason is that the German state pays the gas bills of private households on a one-off basis.